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News/Business. (2012) Author Gretchen Morgenson.




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Jim Johnson 15, Washington 9, Fannie Mae 8, New York 5, Us 5, Minnesota 5, Johnson 4, Freddie 4, Franklin Raines 4, Goldman Sachs 4, Gretchen Morganson 3, James Johnson 3, America 3, Citibank 3, Mozilla 2, Gac 2, O'neill 2, Robert Rubin 2, Greenspan 2, Freddie Mac 2,
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  CSPAN    Q A    News/Business.  (2012)  
   Author Gretchen Morgenson.  

    January 9, 2013
    7:00 - 8:00pm EST  

this week on "q&a," pulitzer prize-winning author and columnist, gretchen morganson discusses her new book with joshua rosner titled "reckless endangerment." c-span: gretchen morganson, in your book, "reckless
endangerment," next to the picture of james johnson county rate this: the calculating political operative, johnson was an ominous architect of the homeownership rate that almost destroyed the economy in 2008. why so much on his shoulders? >> guest: brian, we have to go back in time. a crisis doesn't happen overnight and if you want to understand what happened to create this mortgage bubble and the ensuing crisis, you have to go back to the early 90s when fannie mae and freddie mac were under a little bit of pressure from congress because the the s&l crisis. congress was concerned maybe there were losses sitting in these mortgage finance giants that were caused by public, was a pirate. the republican at the government had started them, that they had
private shareholders, said they were operating for profit. congress was concerned in these giant companies that wanted to make sure that they were overseen, the day were not going to require taxpayer bailouts. so we go back in time to 1991 when james johnson takes over as the head of fannie mae and he really takes this congressional urge or inferior and turns that on its head. because instead of having a regulator is tougher, instead of having higher capital cushions required at the company, instead of having a congress that was more vigilant and watchful for a taxpayer bailout, he turned all that on and what was created as a piece of legislation called
the safety and soundness act that was virtually written by james johnson of fannie mae. c-span: who is he? >> guest: james johnson is a democratic, political operator, had run campaign for president, was the guy who preached wall street a little bit, had worked at lehman brothers and perhaps a bobby and after, the related, as democratic minnesota politics. that's where he was born. that's where he was raised, went to princeton and then came to washington. and really unders to the game, really understood the key thing he knew he had to do was to protect the government subsidy, to protect the implied government guarantee that stood behind fannie mae and its
smaller brethren, freddie mac. c-span: out of reach of another cut line under the picture of the fannie mae headquarters. he said made sensuous type orders in washington with design in colonial williamsburg. i guess in seeing that picture in your description, i started thinking, i don't know if every scene inside this place. i've been writing since the mid-1990s. so i am not a friend of fannie mae. but i've never been inside. some reporters have been inside and there was "washington post" reporter that during mr. johnson's era was allowed to follow him around and did a very in-depth story story on it. but the building itself since telegraph said they message of
power and royalty on most and fannie mae with that of course the taxpayers had to go to disney. >> and the most basic of terms, what does fannie mae do? have commander stan but they do? >> guest: fannie mae is not a mortgage lender. but fannie mae buys mortgage loans that have been created by banks or other institutions. they sometimes hold them on its own balance sheet and reaps the income the homeowner pays or in other cases an ice package of both loans and guarantees them and sells them to investors. so the enterprise essentially all insert guarantees home mortgages and it was set up in the aftermath of the great depression to keep housing finance wheels having. so when you get into a banking
crisis as we did in the depression, home lending dries out. no one is willing to make those laws. so fannie mae was created to step in when the private rockets for mortgages failed. c-span: one of the things in your book is to talk about how much money people to captivate. the overall question is this is a gac, a government service enterprise. how did a government created enterprise have the sensuous headquarters and allow people to take anything he said $90 million over relatively short period of time. how is that possible? >> guest: it is possible because of the implied taxpayer guaranteed. what i mean by that is that virus money from investors in the debt market. so they go out to investors and 71 to raise $100 million or $10 million. what do you want for income that
will make you private security? if you are fannie mae on how this government-sponsored auletta around you, you can borrow money at a far lower rate than other banks that don't have the implied guarantee of the taxpayer. so that difference between what u.s. and enterprise pay to borrow money from the public, and that is very lucrative and that is the subsidy and that is where the riches came from. c-span: do we know how many people work there? >> guest: well, now it's probably much smaller because the enterprises are shrinking. they are taxpayer owned. they are almost in a situation where they are trying to reduce their balance sheet. during the 90s than they were polluting their balance sheet, thousands of people work there. and not just at headquarters.
one of the things they are incredibly shrewd about doing and mr. johnson devised with the sort of grassroots efforts, offices, partnership offices across the country designed to create photo ops for politicians when they came home to their local constituents and to sponsor or participate in developments that looked good for constituents and congressmen. and so, fannie mae was everywhere. it was really ingenious, just a brilliant, strategic plan to really dominate the industry, to co-opt congress and to protect that very lucrative subsidy that i was talking about earlier. c-span: since this crisis of fannie mae, we had tried by calling fannie mae and look in
record books to find the presidential appointed board members. as you know, since they became a gac, government service enterprise, they got five out of 18. you can find a list. fannie mae says write us a letter and there's all kinds of excuses given. you cannot find them. there were some of the people at that presidential appointment to that board and also to the leadership. >> guest: i have to rack my brain, but i remember certain members of the board, jamie gorelick was on the board with a vice chairman. she did very high level, rob emanuel. c-span: freddie mac. >> guest: freddie mac board. we talk about high-level people in washington and the elite power circle. both sides of the aisle, absolutely both sides of the
aisle. c-span: did they make much money? >> guest: jess, dated beard the interesting thing to talk about secrecy, it's fascinating because can you imagine the government sponsored enterprise did not have to reveal what it paid its top executives? public companies have to hardly amounts that they pay their top five. fannie mae and freddie mac do not have to do that. when members of congress had the temerity to ask for this information, they were shut down. c-span: how? >> guest: this is the power of these companies. they would marshal their friends on the hill and beat back any attempt to identify the riches that the top executives are making. c-span: i want to show you video of jim johnson. it's 1996.
it's your reaction to this. >> demographic changes and aging baby boomers have expanded the number of people who seek to own homes. as these forces will come together, they create tremendous momentum and watching the trends develop, we came to understand the urgent need for greater and more innovative financing so more americans can take advantage of the opportunity. just two and a half years ago i announced fannie mae strutted dollars commitment to finance 10 million homes by the year 2000. c-span: what is he saying there? >> guest: he is saying homeownership is a code which i'll be pushing towards. he was crucial to the government's private partnership to push homeownership. bill clinton came out with his partners in homeownership in
1995. fannie mae was right there, jim johnson at the podium with him. it is a goal to increase the rate of homeownership in the united states of america and the idea was if you could allow more people to buy a home who had been shut out of the process, immigrants, first-time home buyers, minorities, that would be a greater good for the nation because homeownership is good, even though there really was no proof that homeownership was a boon to everyone. there is this or around it, wrapping yourself in the american flag, something about homeownership that's no bull and uplifting. but there were some awful lot of money to be made in this partnership and you didn't hear them talking about the money to be made in this partnership, but that was also a huge motivator. c-span: some of the names,
donovan or president obama was working there and bob zoellick, is that the name right? zoellick with the republican party was also there. can duberstein was a member of the board. seal the seams. tim geithner is in your book, nor treasury secretary. was his relationship to all this? >> guest: tim geithner is the president of the new york fed during the years when regulation became extremely lax in this country for financial institutions and particularly new york, citibank was the purview of the new york fed and obviously not paying attention because citibank became one of the biggest nightmares of the bailout brigade. so tim geithner was really at
the creation of this kind of belief that banks could set their own capital standards, which are riveted for a wonderful thing that spreads risk and financial innovation was not to be stopped. there's all this kind of mindset really came down from greenspan i think, who said it really was anti-regulation, not interested in making sure that financial products that were sold to people were not going to go up on them five minutes later. and so, there was a tone that bankers would never do anything so silly as to take the risks that would load themselves up. that is greenspan's notion in his later apologized for saying you just can't believe they didn't understand they were taking these risks. geiger was a big part of that mindset and a bit part of that regime, were bankers are about to kind of set their own rules and capital standards.
c-span: you talk about people in your book. i get you to title a bit altogether. just as sandy was crucial in the late 90s. crucial in getting the elimination of glass-steagall peer classico licit depression era of the bidet separated and commercial banking, protected us pretty well for 70 years. finally come to sandy wilde and his friend, robert rubin drove a stake through glass-steagall's heart. he was dead and gone. sandy could amass an empire known as travelers group, which merged with citigroup, citibank to become citigroup. he was a beneficiary of the elimination of glass-steagall. c-span: and use a rubber band, secretariat of the clinton administration but back to citigroup after that.
today we do say $100 million? >> guest: $150 million over time as an armaments breeze that the company of the board who didn't really have to do much, that certainly made a lot of money doing it. c-span: robert rubin is a democrat and alan greenspan a republican for something on the other side of the right of center. this is a political matter? >> guest: this is again across the aisle. homeownership is this push that really involved both democrats and republicans. private sector and public sector. it is a push that really asked regulators to tiamat with the regulation entities, which was highly unusual. you know, so it was all in affair. to push homeownership to what i think clinton wanted it to be 70% in the year 2000.
he didn't quite get there. they got to 69.7 or something that i have. c-span: crewmember and president bush bragging about the 69%. bush carried the standard also. c-span: is that good people on their own home. is that it about the government should play? >> guest: this is the conversation that nobody's going to have. what role should the government play in housing finance. if you want to subsidize housing in this country we want to talk about it in the populace agrees that something we should subsidize, then put it on the ballot sheet and make it clear and make it evident to make everybody aware how much is costing. when you deliver through third-party enterprises, fannie mae and freddie mac, when you deliver subsidies through public company with private shareholders and executives who
can extract a lot of subsidy for themselves, that's not a very good way of subsidizing homeownership. i think we've seen the end of that movie in 2008. c-span: how much money has the taxpayer had to pay to bail out fannie and freddie? >> guest: at the moment it's $151 billion. c-span: will we ever see that many again? >> guest: it is possible that loss will decline somewhat, but we will never break even. we will never make money on it. it's always going to be some sort of a loss to the taxpayer. c-span: who also is a loser? taken and freddie have a stock be treated? just oyez, shareholders at the end of the line on all the troubles are coming forward and life is accumulating, though shareholders was. a lot of smaller banks who bought the debt issuance of
preferred stock of fannie and freddie were losers because they thought they were money could. but the debt holders came out fine because the government backstopped it. all lussier said jim johnson and all of his colleagues said that no taxpayer dime would ever have to be extended to fannie mae. of course it's proven to be false in september 2008. c-span: here's another clip of jim johnson from 1998. >> guest: and that is about the success it it seems to me those who would change the system really should take onto themselves the burden of proof that their change will improve on the successes we've had. both their system over the cost of mortgages for average families within the system? with their system guarantee liquidity in the system, which of course is part of what makes this all work, where we
essentially have a mortgage system, where you can get the same orchestra to virtually any part of the country at any time. with the new system or what changes are made to assure liquidity were certainly? c-span: what do you think they were thinking at the time? >> guest: when he was saying that? c-span: yeah, were they doing things for the betterment of the country or do you think they had a better quote? >> guest: i think what they were doing is coming up with a masterful way to extract money for themselves while pretending to do something good for the country. homeownership is a good thing. if you can pass savings to barbers, that's a good thing. if you can allow people not typically home buyers to enjoy homeownership, that's also a good thing. but in this way, it was actually correct because it was a company
designed to make profits for the shareholders and pay executives immensely well and use a lot of that sudsy again the taxpayer stood behind. the recent fannie mae was the wealthiest keswick didn't pay as much to borrow money. that money accused by members of congress, to put a partnership offices, to put the pr out there that fannie mae was a do-gooder helps them get their message out with advertising that actually inserted themselves in presidential elections. i mean, this is all about the type in the subsidy, so they would do whatever they had to do. c-span: if you're jim johnson at your desk here in washington and you're looking out at the world, you mentioned the partnership offices. how big were those partnerships?
and he said there were 55 at the time he wrote the book. how big an office with that of pinup feel? >> guest: a couple people, that they would often hire family members of congressional members. so you'd be sure to make sure you're helping your friends back in washington. another ingenious thing that he came up with was to create a foundation or to fund the fannie mae foundation with fannie mae stock, which was at that point in time going to commit because the company was so profitable. what he would do at the foundation money was he with academics to write articles that were very pro-housing, pro-homeownership, pro-fannie mae and freddie mac. and so, he ended up co-opting him as the entire academic community as well by paying them while to write favorable research about the benefits of
homeownership and how fannie mae was delivering on its schools. c-span: you suggesting here that joe stiglitz, a nobel economist. just oyez, they did to piece together, talking about the likelihood, a very small likelihood that fannie mae ever really requiring a taxpayer bailout. c-span: jim johnson said at his desk, the partnerships, foundation. who ran the foundation? was a political job? >> guest: he would put local politicians as i recall on the foundation. then he would put pro-housing advocates on the foundation from across the country. c-span: and the money came out of the treasury fannie mae? >> guest: he put in a big chunk. i forget how much, but at $350 million. but a lot of money and as it
grew and became were more profitable when they were ballooning the balance sheet in the 90s, that amount grew and so the was immense but wealthy and you could deploy that money anyway you wanted to to get the word about the good deed doers of fannie mae. c-span: to read the foundation was folded back into fannie mae. it is still active? adesso giving money away? >> guest: know, is a shadow of its former self did they stop doing taxpayers took it over. they basically shattered the foundation. c-span: the supreme court justice makes a couple hundred thousand dollars a year. how much does the fannie mae president today made? do you know? >> guest: today they don't make as much as they did in the heyday because they are taxpayer owned. it wouldn't look good for the
ceo of either of these enterprises to be making tens of millions of dollars as the ceo of goldman sachs says in the taxpayers them. c-span: why should they make more money than the president? >> guest: is a very complex company. they have to really understand ins and outs of the business and having the risk from the big mortgage portfolio is very complex and they have to oversee it. that's a 30 minutes. i think there may probably $2 million figure. c-span: would have been to public service? >> guest: you tell me what happened to public service. public service is a thing of the past and certainly was never what jim johnson viewed fannie mae has. c-span: here is a gentleman that you read a lot about, who testified on capitol hill and his former congressman kanjorski questioning mr. mozilla. i'll ask you more about it.
>> why didn't our federal reserve, what did the fcc is the question, why didn't i treasury departments at the same statistics i got an 18% failures of mortgages in securitized pools? whited may see this? to have an answer? he ran the company the largest number of days. you participate in pools together? >> guest: certainly we did. these things happen over time, so you're not planning up instantaneously. >> guest: this is the year 2006. >> first of all, we investigated loans, what the cause of that was. >> people didn't have the income, the network and should have never been this close. >> that's not generally cause because people sincere about living in the house who want to preserve the house to make a
payment or contact to see if we can hope the market out. >> what do you think? >> i think that a lot has happened since those words were uttered to make them seem very dubious. c-span: it's actually march of 08. >> guest: that was really before the crisis and then 2000 the stock market hit a new low, but i think mr. mozilla really was probably not as truthful as it could've been about the state of his company. it turned out the ftc sued him for insider trading and in that case they turned out e-mails in which correspondents of the executives at countrywide come in which he called the loans the company was making toxic poison and publicly was of course raving about the company's financial position. so there is definitely a
dichotomy between the private musing of angelo mozilla. c-span: on page 186, released lobbying might not be enough in a scene began inviting people to political connections to join his company's board. then you mention henry cisneros, former head of hard and mayor of san antonio, cisneros was on the board of kb home. but jim johnson is on the board of kb home and jim johnson is still on the board of goldman sachs. >> guest: just come us on the board of target. c-span: is there any evidence he did anything illegal? >> guest: the only thing that was alluded to in his era fannie mae does questionable came out
in the go for your report, the oversight car regulator to conduct it an enormous investigation into the accounting scandal that iraq did at the company in 2005. what they found was, the investigation found the executives would do whatever they had to do, moved mountains to make sure they meet the earnings number wall street was looking for and would generate their bonuses. that is began according to the report under jim johnson. c-span: was there a follow up to check that out and do anything? >> guest: by the time the investigation came out, he was long gone. c-span: is there any callback provisions in our government to get some of this money back that the folks involved in fannie mae, freddie mac and all these gsc's have benefited from, but
the taxpayer loses the whole thing. >> guest: that's right. there are laws that regulators used to patient. they have not been used very aggressively. the main one is the securities and exchange commission under the sarbanes-oxley law at 2002 is allowed to callback incentive compensation in cases where companies have been found to cook their books. here is one of the biggest book cooking of all time, fannie mae. they got some money back, but not very much. franklin raines was the ceo at the time that the accounting scandal and the united states taxpayers continue to pay the legal bills of franklin raines and two of his cohorts and their defense against shareholder
litigation semicon to scandal. c-span: have any of these folks that ran fannie mae ever come public? i don't know they've seen jim johnson anywhere. he's still very much involved in businesses. is any part of the perseus corp. based here in town? >> guest: private equity. c-span: has he gone public with the way you feel about this? >> guest: franklin raines i think i started to come out and talk about housing finance. i think he was on a panel a couple months ago in washington. jim johnson is keeping a low profile, but as you say some imports of gold and saxon target. he is the compensation committee chair of both target and goldman sachs. it was interesting this year, a very prominent in prestigious shareholder of goldman sachs came out with a public letter, urging investors to vote against
jim johnson's reelection on the board of gold and a target because the investors said he had involved in quite a few questionable scandals and they decided his years of fannie mae. c-span: another clip. so we do that, we see today? he said he took $409 out of countrywide? >> guest: he sold stock in the last few years of the company's history before it was sold in a fire sale to bank of america. this was when the boom was pending and he was selling stock in over this. $500 million as seen on a stock he sold he sold just in that. and there were many, many years he was the founder of the come to me and took a lot of me out of it. at huge salaries, et cetera. that is only a portion of buddy took out. c-span: what did he do that was wrong?
>> guest: because he was making private statements different from his public statements and that he was selling stock at the same time, that was insider trading. he was trading on nonpublic information and he had increased the amount of shares he was selling because he made at the end was near. c-span: has he been charged by any entity of doing anything illegal? >> guest: no, the sec settled for $20.5 million. c-span: here is mr. mozilo from the same hearing. >> speculators didn't work out for them. values went down. a lot of it was fraud. how long did it take you to come up with the understanding that there is this type of an 18% failure rate before you send word down the line. check all of these funds or future laws are characteristics that we don't have this tremendous failure. >> guest:
>> is part of what we do we are adjusting. >> i understand, but don't you put all this together and statistics and say these packages presale now are failing to such a horrific rate that they'll never last and there will be a total decimation of our business and of these mortgages? >> pajama sam's expired, the police answer. >> these mortgages are putting complex securities, so it's difficult to see a series of loans in that particular security, another security. the other and he knows of security holder. >> the language people use, tranches, what does that mean? >> guest: they siphoned a securities in different ways. higher level, higher quality phones down to waste. it is fascinating to watch the benefit of understanding the foreclosure crisis and what has happened to so many people lured
into these loan, losing their homes, losing their credit score, it's really been a brutal couple of years. countrywide was, as you remember, the largest single supplier to fannie mae of loans. so mr. mozilo didn't have to worry about every loan he made because an awful lot went to fannie mae and therefore read the taxpayers bottom line. c-span: later on in advocacy johnson, jim johnson was an early initiative to the vip program starting in 1998 and 32,007 versus six cover your thoughts from countrywide with a total of more than $10,000,000.90 go on to list a bunch of others, including kent conrad, chris dodd, barbara boxer, donna shalala, richard holbrooke come i guess he was in business. this particular this is all democrats.
were there any republicans? >> guest: i think there were some republicans. i know the bennett, his son raymond of the partnership offices, so again, it was across the aisle participation here. c-span: how good a deal with this? >> guest: is hard to know because he didn't understand what the race for. you can be sure they got special treatment is started speeding the process, lower interest rate, those kinds of things. lower interest rate has to interest rate over time in a mortgage. c-span: eisai at the beginning of your book, josh and i -- who is josh? >> guest: my fabulous co-author, who is a genius in the analysis of financial institutions and housing finance in particular. josh rossner, an analyst at graham fisher in new york. he and i have never collaborated before on a book, but he had
been a source of mine for many years and was one of the first callout for homeownership goals as potentially faulty and among the first to really point out that the kinds of mortgages that they were making were really going to lure people in and create problems. so he was very perspicacious and on the forefront of questioning a lot of this conventional wisdom. reiko we felt compelled to write this because we're angry to american economists almost wrecked his self-interested, arrogant people who have not been held accountable for their actions. but is there another way of these people just figured out how to use the system? and most of the time fair and honest. not trying to put words in your mouth, but they are saying she's got a grudge. >> guest: i have a grudge if
it means being a taxpayer down with 151 billion in losses. i have a problem with that. i have a problem with allowing companies to take reckless risks, pay themselves immensely as they are doing it and when the bill comes, when the risks share with you the problematic in the funds they need go god, they don't have to pay the freight. the taxpayer pays the freight. i have a problem with people in this country have a problem with that. i don't have a problem if people are operating within the confines of business practices and if they're being paid very well to manage risks, at another problem with that. i have a problem with taking reckless gambles, reaping enormous profits and walking away with your money and leaving a taxpayer within the bad. that's what i have a problem
with. c-span: why they'll been to get this and take a taxpayer money? with the answer? >> guest: in this case, the answer was they were able to wrap themselves in the american flag of homeownership. jim johnson was able to argue that if you touch the system, if you change it like he said in the clip, are you going to be able to deliver a home loan at the cheap rate that we will? this was always the threat of the very people who criticize the business model. it was always her anti-homeownership. your anti-the american way. but what he is not saying is that of that subsidy, he's only passing on to the borrower two thirds of it. he's keeping one third to himself and that isn't an efficient way to subsidize housing. c-span: i want to show your
recent clip. >> msf reporter, but it's hard here do have to have it that god. you have to have an editor who's going to stand up against the pressures, which are e-mails. you have to have a different mindset. you don't want to be a part of the party. you don't be invited to peoples houses do houses to cover. you don't want to be feeling like you're part of that scene and a lot of journalists unfortunately get into the idea that they can be friends of the people they are covering. i don't do that kind of journalism, but i think it's unfortunate that there are quite a few who do. c-span: explain what it's like to be a tough reporter. >> guest: well, for me it is fun. it allows me to get to the truth, which is really what i'm after. c-span: have you do it? >> guest: business reporting
is a lot cleaner and easier than political reporting. outside of that. there's a lot of public information, government documents that companies have to file it really can reveal immense amounts of information. i've had people calling me over the transcend the whistle theirs, obsessed about what they see happening in an organization for some disarray there. the people are gone forever wall street. a visit broker myself on wall street long ago. so i have a lot of contacts or meteors on the street. leave it or not, a lot of people know wall street can be honest and it is an honest place for many people and they don't want the bad apples anymore than i do or you do and so they call me and tell me about practices they signed disturbing. c-span: had usually been friends of the people the people you cover and why did you say so
many charla surfers with an? >> guest: well, look at it this way. i call it access journalism. in many types of reporting, you're relying on people to deliver you sent and you can't get any other way, particularly political reporting. you rely on someone dropping a classified document in your lap and then you're thrilled to have it, but then your trick is to explain how you got it and knowing that whoever dropped it in your lap had an ax to grind. business reporting you don't need to do that. you can do your work. there's more information available. you can do right arounds. they don't have to participate. it's much harder than political reporting. so what we do and what i do in business reporting is, i mean, i don't get invited to dinner at these peoples homes.
i am the skunk at the garden party and i like it that way. i say to myself i go home everyday tuna has been in sun and that's the way you like it. i don't believe in socializing with the people and covering. it is just that simple. c-span: what is the downside for you? what do you miss? >> guest: the downside is i will not get the piece of information that someone wants me to have that makes them look good. c-span: why do you want to do this? the interesting thing is he went to school in minnesota to say no mouth -- saint olav. just got back up silent treatment. i asked him perpetually at the time we're writing the book and i never received the courtesy of i am not going to return your call. c-span: what about mr. mozilo?
>> guest: he's never spoken to me. barney frank spoke with me. i like to sort of separate -- there's two kinds of people in the story. what are the housing zealot, the people who believe homeownership is worthy and we should push for it to matter what. i would put burn in that category. it wasn't that he personally benefited and then there are the people who want the personal enrichment from the puppet is a partnership. people like jim johnson and franklin raines. there's two kinds of people in the story. the phallus and personal enrichment. c-span: edc and the cut lines under barney frank's pictures that almost at the anne frank requested fannie mae hired his partner in 2001 when devising regulations for the company. today hiram?
was his name? >> guest: they did. i forget his name. i'm sorry. c-span: i can look. i think its services. >> guest: yes, they did hire him. rock out how often was that done? senator bob bennett. >> guest: it was done like that constantly. can you imagine saying no to such a thing? if you are fannie mae company you bought many chips for people as you can possibly have. if it means hiring someone and particularly in this case, and able candidate for the job. but as told by they people it's time was he was interviewed extensively throughout the company looking for just the right spot for him. you have to be insane not to give barney frank, do him a favor because he is on the financial services committee that oversees regulator and cause you to testify. i think that is pretty common
practice. c-span: where did you grow up? >> guest: where did i grow up? i was born in pennsylvania, spent some time in the small town of toronto. my father was an academic who kept getting degrees and the euro monday when they got his phd in the two southwestern ohio for high school and college in minnesota. came to new york immediately had been there ever since. most of it and western. have a lot of minnesota team spirit and a father point back of his sister mother father were there. a lot of dna for minnesota. c-span: is marketing your big name? >> guest: yeah. c-span: what is yours? >> guest: panderer region in danish. c-span: what is your sense comes the similar background for vice president mondale, you know, he
was there. >> guest: it really wanted to have an interview because i really wanted to reflect his point of view. josh and i were eager to hear him out on this. but i can't tell you because i never even got a chance. >> guest: you keep reading all these connections in this town and in this case, these folks are making millions and millions of dollars. why didn't anybody stop? >> guest: people try to solve it. there's a wonderful and go to an episode in the book for the cbo, congressional budget office in the mid-90s decides to do the capable, decides to try to calculate the amount of the subsidy, to calculate what fannie mae and freddie mac got in terms of the government said city, lower cost of capital, lower costs of debt they had. it had never been done. the company did nobody to be
done because they didn't want anybody having any inkling of billions of dollars in subsidies every year that they were reaping. they also was told to they passed nickel to the borrower, which bpo wanted to test. some are bad, a research analyst has cbo took this on as a study, came up with the figure a kind of calculation of how much the subsidy, $6 billion are sent me in one year fannie and freddie. this is in the 90s one was real money. and so, he's going to deliver this through june o'neill, head of cbo is going to deliver this research to congress. there's a wonderful moment for after they've done all the work and all the analysis can the fannie mae asks for a meeting with june o'neill. so she invites them in.
the researchers are at the meeting with three henchmen are fannie mae and they sure to persuade june o'neill not to publish this research. it was a big threat to them because nobody knew $6 billion is the size of the subsidy and had to also determine two thirds of the subsidy beside a pastime every year. that's a lot of money. so this is a threat to them and they wanted to make sure it wasn't public and so they pushed and pushed and june o'neill told me she felt like she'd been visited by the mafia. but she said i think that i'm sorry, gentlemen. they couldn't poke and a host the arithmetic. that is all the bromides of homeownership. you're going to make it harder for people to own a home if you print this research. this is the typical position. she said gentleman come and say
are required to publish this paper part of it. we know he did a good job and she went to deliver to congress and was savaged by all of the fannie mae and freddie mac detectors who are members of congress at the time. c-span: by the way, to have been a weather report members appointed had to be approved by the senate? >> guest: i don't have the answer to that. c-span: we still try to find this list of people. >> guest: you've piqued my curiosity. i have to go and do it. c-span: one thing is getting information. how hard was it for you to get this information in holland to take you to do this? >> guest: josh had a lot of the information is not the because he had been following the company for years and years. i summoned my notebook because i've been following the company in writing about it since 1995 or six another step towards at ford's then later at the paper. so pleasant starting from scratch. we both have a lot of experience
with the area with the crisis occurred with it to that. so i think it took nine months to rate it. c-span: is there information you'd like to have -- obviously there's also some information, but that she can't get into in washington d.c. because there's an excuse for holding it up. you mentioned something in here about hud held back information on mortgages. on a day-to-day basis, how much information is being withheld? >> guest: right now it's hard to say. early on this quite a bit of control of the information. interestingly, covering the financial crisis from wall street was easier than when it moved to washington. washington became a much more confined them to close shop and hard to get information.
i remember us an example and treasury started when of their programs for the modifications, we were trying over and over to get information on how many borrowers have been able to be hoped by this program. it was like pulling teeth. you might as well have been asking for the formula for coca-cola. they would not tell us. it was ultimately because the program is doing very well. so yes, there's a lot about asserting that i would love to know arduous meeting at, whose whose lobbyists and meeting with high-level regulators, members of congress. you know, that interaction would be fascinating to know and she's very, very difficult to come by. c-span: how much money can fannie mae used to lobby? >> guest: they are not allowed to lobby anymore. c-span: how much can be used to contribute to political
campaigns? >> guest: i don't think they're about to do that anywhere. they had to give it the foundation, the partnership offices. i know they gave up the lobbying. they are not supposed to lobby. so it was a changed world after labor day 2008. c-span: was the chances the american people will see inside the sumptuous headquarters of fannie mae or for that matter, freddie mac, which we haven't talked about it all. c-span: i don't think that's very likely. i think the companies are now hunkered down. they are wards of the state. they are certainly not the aggressive swaggering about town entities they once were. c-span: what percentages of the mortgages are still up by freddie mac and fannie mae? >> guest: they are dominant. 80% of mortgages are either backed by or owned by period
ending, there is a really good mortgage market at the moment. fannie mae and freddie mac -- c-span: in the middle of your career, he worked on wall street, when he ran for president. >> guest: i thought would be interesting. this is a 1995, a newborn child i didn't travel as extensively as most crisis theories do. i was at "forbes" magazine working on the editorial side, a reporter and editor says steve is on the positions i guess we do it, i thought that might be kind of interesting. i had wanted to be a political reporter growing up, so i thought this might be cool. six months of. it was very interesting because i got to see the other side of the notebook. i was working as journalists, so it really helped me become a better choice.
bright co. what did you learn about journalists? >> guest: in this case he traveled in a pack. they didn't care to understand, you know, some of the ajc candidate had. it is very sort of, the perception was he wanted a flat tax that he could enrich himself. that was the same depth as the analysis can't. and i am a person who likes to dig in and out and the the bottom of some pain. the kind of superficial approach of the campaign, which i understand because you're under the kind day in, day out was really kind of news to me. c-span: you can reach usually every sunday on the front page of the business section. today we recorded mr. in the front page of "the new york times" with merrill lynch and bank of america. what are the rules for you at "the new york times"? homages opinion and how much reporting interview answer to?
>> guest: my columns which appear in the front page of the business section reported columns. that means they are backed by fact, that i'm not just gazing at my navel and then opining about what i see. it is really more reported columns. you know, it is not overwhelmingly opinion. i really love to report, so what i do is kind of a little more underreporting site than on the opining side. i also do new stories that appear in the daily occasionally, so that is a little bit of a difference. a lot of other colonist onto new stories, but i really like to keep in the mix to keep up with what's going on. who do i report to? a report to the sunday business editor, david killen in the business editor of the paper who is literate and copy it. c-span: we only have about 90
seconds. as we look ahead, this whole thing you've been writing about, do you have any hope this'll never happen again? >> guest: i don't unfortunately because we haven't solved the crucial problems. we do not fix the peril of today to fill institutions. we have never sought fannie mae and freddie mac. we've not had the conversation about the role the press event at essay. we need to have a conversation. josh and i were hoping it would create the conversations that people have a robust discussion and decide, but we haven't done that. we haven't got near to that comes to the chances of another crisis are pretty great. c-span: are you planning another book? >> guest: i am now. c-span: by not? >> guest: i am tired. i have a day job and it's pretty demanding. i did not take a book leave to write this book, so unless it is
something really super compelling that comes along, it would have to be very good polling for me to take on another project. by the way, who named it "reckless endangerment"? >> guest: we named it ourselves. that really stuck with us and the publisher was fine with it. c-span: gretchen morganson, author with joshua rossner of "reckless endangerment: how outsized ambition, greed, and corruption created the worst financial crisis of our time." thank you very much. >> guest: you're welcome. thank you ..